(By Michael Harris) Significant divergences between two indicators I track are not very frequent and usually indicate a strong move in either direction, up or down. In the case of the S&P 500 and in my opinion the move will be to the upside and it will be sizeable although I cannot say for how long it will last.
As I noted yesterday and the day before that, the trendline TL and the 30-day simple moving average define a support level which if broken to the downside will probably cause a test of the 200-day moving average near 1,306.
However, there is a significant divergence between the RSI(14) and the MEI(14), my proprietary indicator. The RSI(14) is dropping while the MEI(14) is rising, as it can be seen from the lower indicator pane enclosed in a circle. These divergences are not very frequent and that may mark the beginning of a strong move in either direction. In this case I think the direction will be up. Nothing can be said about the duration of the move at this point.
Disclosure: no relevant position at the time of this post.